|  | | 2007 News and Press Releases | | |
HEADLINE NEWS:
The Dark Side of Global Accounting Standards, Expect loose standard-setting in the oil and gas industries and a ton of litigation if convergence hurtles down its current track, critics say.
David M. Katz
cfo.com. November 15, 2007
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EXCERPT: Speaking at a roundtable discussion on global accounting standards at New York University's Stern School of Business on Monday, Charles Niemeier, a member and former acting chair of the Public Company Accounting Oversight Board, said that he was "a bit troubled by the speed" of the SEC's march toward the convergence of U.S. and international accounting standards. "If we eliminate reconciliation, what have we done? I have some fear that we're crossing the Rubicon — that we've lost leverage in order to get closer [to global uniformity]." Leverage by U.S. regulators and standard-setters to push for rigor in converged standards could be lost, as well as the clout to hold individual companies to international rules, Niemeier told CFO.com. At the roundtable, the audit firm overseer disputed a basic premise of the proponents of convergence: that if the international standards are adopted in the United States, it would produce a clearer system based on solid principles rather than rule-based minutiae. "Some say Europe is principles-based. I beg to differ. It's younger," he said, suggesting that much of the detail in GAAP is justified by long-standing experience. Some speakers said that IFRS lacks the detail provided under GAAP to provide adequate financial reporting in a number of specific industries in the United States, particularly oil and gas and insurance. By contrast, critics of U.S. GAAP's complexity, including the SEC's own advisory committee, consider industry specific guidance to be one of the U.S. accounting system's major flaws. At the same time, many roundtable participants worried that the U.S. legal system — also blamed for the complexity of U.S. GAAP — might trip up global accounting standards too. Under the U.S. legal system, they said, auditors feel they must adhere closely to preset rules in order to avoid being sued. In order for IFRS to take hold in the United States, there needs to be "a change in the way we look at litigation in America, where it's a mark of honor to sue someone," said Stern accounting professor Seymour Jones at the roundtable. |
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